Depreciation is the reduction in value of your car caused by wear & tear and even just the passing of time. It's one of the biggest costs car owners face.
Buy a new car, and depreciation is at its worst. The moment a car isn't brand new anymore, thousands can be wiped off its value. Even 'nearly new' cars can lose thousands over a few years ownership. So how can depreciation be minimised, or even avoided altogether?
New cars lose the biggest amounts of their value within their first three years - often over half their purchase price. So if you've bought a new car, selling it on within this time can help stem these most serious losses.
How long the waiting list is for your new car will also give a clue to what its depreciation will be like. A long waiting list means big demand but not many being produced, so used values are likely to hold up well.
New or used, some makes of car keep their value better than others. Slowest to depreciate are prestige makes like BMW, Audi and Mercedes, because they are judged to stand up better to wear & tear. This makes a basic model of one of these brands a far more sensible purchase than a high spec model of a lower-priced brand.
For example, a Mondeo 2.0 Ghia X and Audi A4 2.0 SE have a similar new price of around £20,000. Yet after three years typical ownership the Audi will be worth nearly £3,000 more than the Ford.
Depreciation rates are also affected by whether the model of car you want to buy is about to be replaced and whether the maker is doing things like discounting new cars heavily or, on the other hand, has big new plans to promote their brand. To avoid taking a really big hit, be sure to follow the latest fashions in style and colour.
To find out roughly what your chosen car's going to be worth when you come to trade it in, check out the advert or forecourt prices for cars a few years older than the age of car you're thinking of buying. Or use a service like Parkers or What Car used car price guides.
The way to minimise depreciation even further is to buy a car that has depreciated almost to nothing already. These days that's not necessarily an old banger. Cars over 8 years old can be worth next to nothing yet still be a reasonable buy if they've been looked after.
But if you want to stick two fingers up to cash-sapping depreciation altogether - buy a classic car. It doesn't have to be something exotic. A good old Triumph, Morris Minor, Rover or even Ford can be cheap to maintain, be just as reliable as a modern car if looked after properly and even be a bit of fun. Many classics have excellent clubs and suppliers for any parts you'll need. What's more, it might be road tax-free and even actually increase in value! Perhaps an ideal second car?
